USING THE SOE AS A VEHICLE FOR STABILITY

In document Visit our website for other free publication downloads (Page 55-73)

Map 1. Liberian Rubber Plantations

IV. USING THE SOE AS A VEHICLE FOR STABILITY

General Guidelines.

A major challenge in stability operations is how to harness SOEs in the short term in the immediate wake of conflict. These enterprises usually appear unviable and infected with the political forces that created the conflict in the first place. However, revitalizing SOEs reassures a conflict-prone country’s populace that its legitimate government is committed to immediate improvement of their well-being. The government’s task of revitalizing SOEs is not inconsistent with attempts to create a sound market-based economy.

Instead, it is a way to secure the population’s support for rational privatization in the longer term and to attract domestic and foreign investment for sustained economic progress. Thus, revitalization of SOEs is a useful objective on the road to stability.

The use of SOEs in stability operations should begin with proper answers to the following basic questions:

• What SOEs were critical to the pre-conflict economy?

• What domestic and foreign markets will sup-port these SOEs post-conflict if they become viable?

• What will be the costs associated with recon-struction of the SOEs?

• What should be the reconstruction order of these SOEs, keeping in mind functionality and market support?

• What short-term assistance (such as demobili-zation subsidies for soldiers) might be integrated in the reconstruction of SOEs?

SOEs generally function as part of the public service infrastructure, such as electric power and water utilities, ports and transportation facilities, but they sometimes function commercially, as with banks, airlines, and commodity plantations. During the immediate post-conflict period—when organizations such as provincial reconstruction teams can be used for the initial screening and selection of SOE revitalization candidates—planners should not neglect the need for institution-building, which typically requires medium- and long-term expertise typically found in economic development agencies. The need is pertinent given that SOEs can be national in scope of operation and scale of resources. During this period, the management of the SOEs should be aimed at avoiding conflict among ex-combatants. The goals should be the reestablishment of physical security and the installation of politically neutral management in the important SOEs. Use of expatriate managers, hired by transparent international tender, as was done in Liberia, may be necessary to achieve neutrality.

The critical SOEs should be prepared for refurbishing and recapitalization by means of privatization when appropriate.

Measuring Progress.

In the immediate post-conflict period (the transition from active combat to tenuous peace), metrics are essential for gauging the pace at which the state-owned enterprises are transitioning from the repair of conflict damage to sustained production. Such metrics are dependent on broader metrics of stability, because SOEs are often at the core of both the economic and the political dynamics of conflict-prone societies.

The broader metrics often measure the state of the infrastructure (the condition of entities that provide essential public services), but the term SOE embraces both infrastructure and commercial organizations like plantations, airlines, shipping and mining companies, and similar activities. It is also important to remember that infrastructure includes not only physical hard- ware but also organizations, the labor force, and mana-gerial systems. Although the priority task in the post-conflict environment is virtually always restoration of essential public services, the authorities responsible for putting the economy on a sound footing must be prepared as well to address the commercial SOEs, especially when the output and the income they generate are important to the populace.

An appropriate overall metrics framework for determining the progress of stability operations, with an economic component that encompasses SOEs, is the analytical tool known as MPICE. It establishes among its desired end states a Sustainable Economy, our main concern in this paper, along with two prime goals: diminish the drivers of conflict and strengthen institutional performance.129 The first of the eight objectives in strengthening institutional performance is strengthening infrastructure, progress toward which is measured by the level of the availability of electric power and essential services (water, sewage, telecommunications, trash removal, and public transportation) (see Figure 1). Another one of the eight objectives is strengthening of employment. These two objectives are directly related to production, or the output of economic resources.

Figure 2. Measuring Progress in Conflict Environments:

The Economic Component.

The remaining six objectives (which relate to fiscal integrity, regulatory and corporate governance, financial institutions, the private sector, management of natural resources, and economic performance and self-reliance) relate to policy frameworks that only indirectly affect production. This dichotomy between production objectives and policy objectives, which together strengthen institutional performance, is shown graphically in Figure 2. We now turn to a more detailed treatment of the use of sound metrics in measuring SOEs’ contribution to the economic aspect of progress in conducting stability operations.

Strengthen Institutional Performance.

The dichotomy shown in Figure 2 is especially helpful in the immediate post-conflict environment.

Although all eight objectives are essential to the

PRODUCTION POLICY

Infrastructure Fiscal Integrity

Employment Regulatory/Corporate

Governance

Financial Institutions Private Sector

Management of Natural Resources

Economic Performance and Self-Reliance

end state, Sustainable Economy, there are clear interactions among them. When hostilities substan- tially cease, proper sequencing and application of resources require that restoration of production and employment be the priorities. They are the foundation of a sustainable economy and contribute directly to the coequally important end state, Stable and Secure Environment, through the creation of jobs that deplete the population of potential insurgents.

The dichotomy portrayed in Figure 2 is even more clearly visible in another set of metrics, the Framework for Success: Societies Emerging from Conflict, which was designed 2 years before the MPICE (see Figure 3).130 It specifies desired end states, critical leadership responsibilities, and key objectives for success. Its end state, Sustainable Economy, has nine objectives related to SOEs, as appear in Figure 3.

Figure 3. Framework for Success:

Societies Emerging from Conflict—Physical and Policy Objectives. Limit corruption and the illicit economy

Protect, manage, and equitably distribute natural resources

It may be safely assumed that the military commander of a stability operation will first address the objectives related to physical production; therefore, the set of metrics used to evaluate SOEs includes only those relevant objectives. The break-out of objectives in Figure 3 must not induce the commander to focus exclusively on production objectives, or induce the commander’s superiors to encourage reporting only through stovepiped organizational channels. To avoid these potential pitfalls, all agencies must take a broad perspective, viewing their individual objectives in relation to the operational mission, thereby promoting the synergy of team effort.

Establishing a widely approved set of metrics to measure progress is essential to the success of stability operations. Momentum is both the key characteristic of successful operations and the reason for the central importance of metrics: “If a mission is not moving toward stabilization, then it is not moving toward a viable outcome, and it will continue to require international engagement.”131 Experience has shown that “the main barrier to measuring progress is political, not conceptual” and that the first step toward success is to “depoliticize metrics.”132 All those engaged in stability must therefore resist political pressures to show success undocumented by facts on the ground. Despite the understandable stakes of the interested political actors, yielding to such pressures would jeopardize the credibility of the operation and its prospective end state. A good set of metrics can be the basis for specific, practical actions and measurable results, as shown in Figure 4.

The imperative nature of using the SOE as a vehicle for stability is clear. Viable SOEs that exist in the post-conflict environment not only can be used,

they must be used. They are a key component of the platform for stability. To neglect the SOE is to delay progress toward the end state, a Sustainable Economy, and its companion end state, a Stable and Secure Environment. The fact that dealing with the SOE does not fall neatly into the purview of one agency and thus requires interagency coordination does not mean it can be avoided. Assuming we can accurately measure the contribution of the SOE, its use will accelerate progress toward stability and mission accomplishment.

Figure 4. Metrics for Gauging the Contribution of to inspect operations and survey public at frequent intervals.

Level of essential services

“restored” (= pre-conflict level at a minimum) and follow advice of USG and international agencies to determine pre- and post-conflict levels of production and delivery.

Planning and Evaluation:

Use same advice to determine technical and resource

ENDNOTES

1. Global Trends 2025: A Transformed World, Washington, DC:

National Intelligence Council, November 2008, p. 10.

2. Pier Angelo Toninelli, The Rise and Fall of State-Owned Enterprise in the Western World, Cambridge, UK: Cambridge University Press, 2000, p. 10.

3. Ibid., p. 9.

4. Ibid., p. 22.

5.Ibid., p. 5.

6. Ibid, p. 16.

7. Ibid., p. 14.

8. Joseph E. Stiglitz, Making Globalization Work, New York:

W. W. Norton & Company, 2007, p. 35.

9. Sasha Lilley, “On Neoliberalism: An Interview with David Harvey,” Monthly Review, June 19, 2006.

10. Stiglitz, pp. 34, 36.

11. Working Notes, Economic Section, U.S. Embassy, Maputo, Mozambique, December 1989.

12. Benjamin Appelbaum, and Peter Whoriskey, “As Overseer and Owner, U.S. Aims for Balance,” Washington Post, May 19, 2009, p. A1; and David E. Sanger, “U.S. Bank and Trust?

Nationalization Gets A New, Serious Look,” New York Times, January 26, 2009, p. A-1.

13. National Intelligence Council, p. 11.

14. Ibid.

15. Anna Paterson, and James Blewett, “Putting the Cart Before the Horse? Privatization and Economic Reform in Afghanistan,” Briefing Paper Series, Kabul, Afghanistan:

Afghanistan Research and Evaluation Unit, November, 2006, pp.

12, 15.

16. Martin Weidauer, “British Rail,” Ernst Ulrich et al. (eds.), in Limits to Privatization: How to Avoid Too Much of A Good Thing, London, UK: Earthscan, 2005, pp. 87, 90, 93.

17. Roger Levett, “Does Privatization Provide the Right Choice of Choice? Observations from the UK,” in Ulrich et al., p.

288.

18. John R. Saul, “The Collapse of Globalism,” Harper’s Magazine, Vol. 308, Issue 1846, March 2004, p. 38.

19. Olivier Bouin, “The Privatization in Developing Countries:

Reflections on a Panacea,” Policy Brief No. 3, Development Center Policy Briefs, Paris, France: OECD Development Center, 1992, pp.

12, 13.

20. David Parker, and Colin Kirkpatrick, “Privatization in Developing Countries: A Review of the Evidence and the Policy Lessons,” Paper No. 55, Working Paper Series, Manchester, UK:

Center on Regulation and Competition, 2003.

21. Yair Aharoni, ”The Performance of State-Owned Enterprises,” in Toninelli, p. 50.

22. Ibid.

23. Ibid.

24. The World Bank, “State-owned Enterprises Reform In Iraq,” Reconstructing Iraq, Working Paper No. 2, July 26, 2004.

25. The U.S. Institute of Peace has highlighted the importance of the period toward or right after the end of conflict by designating it “the golden hour,” which in the medical field is the period when a patient hovers between life and death. In reconstruction efforts, this period is the year immediately following the end of

hostilities.

26. Ambassador John Blaney, Comments at the Workshop on Transition, U.S. Peacekeeping and Stability Operations Institute, U.S. Army War College, November 8, 2008.

27. Rick Whitaker, “Let There Be Light: The Role of Elec-trification in Liberia’s Post-Conflict Stabilization,” Washington, DC: International Resources Group, USAID, 2008.

28. Rick Whitaker, International Resources Group, interview with the author, January 13, 2009.

29. Andrea Tamagnini, UNMIL, interview with the author, February 24, 2009.

30. Prepared by UNMIL, GIS Unit, April 12, 2007.

31. Tamagnini.

32. Mikel Jordan, rubber industry consultant in Liberia, interview with the author, April 28, 2009.

33. Colonel (Ret.) William Flavin, U.S. Army, former Special Operations Planner, Supreme Headquarters, Allied Powers Europe, interview with the author, May 26, 2009.

34. Admiral James O. Ellis, U.S. Navy, Commander, Joint Task Force NOBLE ANVIL, during Operation ALLIED FORCE,

“A View From The Top,” Power Point presentation.

35. Ibid.

36. Michael Pryce, member of NATO’s planning staff prior to and during deployment, interview with the author, May 6, 2009.

37. Ibid.

38. Colonel Robert Buran, USMC, member of Task Force NOBLE ANVIL, NATO’s operational allied force, prior to and during deployment, interview, May 1, 2009.

39. Major General A. J. H. Van Loon (The Netherlands),

“Coalition Operations,” presentation to the U.S. Army War College, Class of 2009, January 27, 2009.

40. Michael Palairet, “The Economic Consequences of Slobodan Milosevic,” Europe-Asia Studies, Vol. 53, No. 6, September 2001, p. 907.

41. Ibid., p. 913.

42. James Wasserstrom, “USIP Briefing: State-owned Enterprises: Post-Conflict Political Economy Considerations,”

March 2007, p. 3.

43. Palairet, p. 913.

44. Stephanie A. Blair, et al., “Forging a Viable Peace,” Jock Covey, Michael J. Dziedzic, and Leonard R. Hawley, eds., The Quest for Viable Peace: International Intervention and Strategies for Conflict Transformation, Washington, DC: United States Institute of Peace Press, 2005, pp.218-219.

45. Ibid., p. 218.

46. Wasserstrom, pp. 3, 4. The inability to have trash collected was a similar symbol.

47. Ibid., p. 3.

48. Sergio Claure, USAID Kosovo, and Kirk Adams, Director of Privatization, Kosovo Trust Agency, Interviews and e-mail exchanges with the author, February 10, 2009.

49. Kosovo Agribusiness Development Program Seminar,

“The Future for Agribusiness in Kosovo, USAID Kosovo, “ June 14, 2001.

50. Representatives of the U.S. Office Pristina, the UK Office, and other diplomats, interviews with the author, June 2001.

51. Flavin.

52. Wasserstrom, p. 3.

53. Leon Barkho, “Iraqi Economists Urge Privatization,”

Associated Press Online, April 14, 1999, available from www.

lexisnexis.com/us/lnacademic/delivery/PrintDoc.do?

54. L. Paul Bremer III, “Operation Iraqi Prosperity,” The Wall Street Journal, June 20, 2003, available from www.lexisnexis.com/us/

lnacademic/delivery/PrintDoc.do?

55. Charles J. Hanley, “U.S. Selling Off Iraq-Owned Companies,” Associated Press Online, October 17, 2003, available from www.lexisnexis.com/us/lnacademic/delivery/PrintDoc.do?

56. The World Bank, “State-owned Enterprises Reform in Iraq,” Reconstructing Iraq Working Paper No. 2, July 26, 2004, p.

v.

57. Ibid.

58. Iraq Private Sector Growth and Employment Generation (IZDIHAR), “Excess Employment in State-owned Enterprises in Iraq,” Morristown, NJ: The Louis Berger Group, USAID Contract

#267-C-00-04-00435-00, June 2006, p. 30.

59. Ibid.

60. Paul A. Brinkley, Under Secretary of Defense for Business Transformation, “Restoring Hope: Economic Revitalization in Iraq Moves Forward,” Military Review, March-April, 2008, pp. 8-9.

61. Zoe Cooprider et al., “State-owned Enterprises: Post-Conflict Political Economy Considerations,” Washington, DC:

United States Institute of Peace Briefing, March 2007, p. 1.

62. Ibid., p. 2.

63. Ibid.

64. Ibid.

65. Brinkley, pp. 13, 14.

66. Ibid., p. 14.

67. Colonel (Ret.) David Harlan, USMC, interview with the author, November 19, 2008.

68. Ingrid Harder, “Operation Economic Overhaul: CPA Efforts to Resuscitate the Iraqi Industrial Base,” Washington, DC:

United States Institute of Peace, Post Conflict Peace and Stability Operations, April 20-24, 2009.

69. Anne Ellen Henderson, “The Coalition Provisional Authority’s Experience with Economic Reconstruction in Iraq,”

Washington, DC: United States Institute of Peace, Special Report 138, April 2005.

70. II MEF (FWD) Economics and Governance Conference,

“Report of Proceedings,” Institute for Defense & Business, November 18-20, 2008.

71. 25th Infantry Division Business Transformation Roundtable, “Report of Proceedings,” Institute for Defense &

Business, October 1-2, 2008.

72. MNF-W (Designate), Pre-deployment Governance and Economic Development Roundtable, “Report of Proceedings,”

Institute for Defense & Business, November 29-30, 2007.

73. 25th Infantry Division Business Transformation Roundtable.

74. Joseph Hanlon, Senior Lecturer, Development Policy and Practice, London, UK: Open University of the United Kingdom, interview with the author, March 5, 2009.

75. Carrie Manning, The Politics of Peace in Mozambique: Post-Conflict Democratization, 1992-2000, Westport, CN: Praeger, 2002, p. 5.

76. U.S. Ambassador to Mozambique Melissa Wells, comments to the author, December 1990.

77. Manning, p. 5.

78. Ibid., pp. 7-8.

79. James T. Smith, USAID Director in Mozambique, 1997-98, interview with the author, March 16, 2009.

80. Manning, p. 209.

81. Ibid., p. 30.

82. Richard Synge, Mozambique: UN Peacekeeping in Action, 1992-94, Washington, DC: United States Institute of Peace, 1997.

83. Ibid., p. 75.

84. Ibid., p. 91.

85. Ibid., p. 108.

86. Ibid., p. 83.

87. Ibid.

88. Dennis C. Jett, “Lessons Unlearned—Or Why Mozambique’s Successful Peacekeeping Operation Might Not be Replicated Elsewhere,” The Journal of Humanitarian Assistance, December, 1995, available from web.archive.org/web/2006108184458/

www.jha.ac/Ref/aar008.htm.

89. Ibid.

90. Carrie Manning, author of The Politics of Peace in Mozambique: Post-Conflict Democratization, 1992-2000, interview with the author, May 13, 2009.

91. Resident Representative of UNDP in Maputo, Mozambique, interview with the author, April 23, 1994.

92. Synge, p. 84.

93. Ibid., p. 109.

94. Ibid., p. 82.

95. Jair Van der Lijn, “If There Were Only A Blueprint!

Factors for Success and Failure of UN Peace-Building Operations,”

The Hague: Netherlands Institute of International Relations, Clingendael, p. 15, available from jlijn@clingendael.nl.

96. Carter Malkesian, Center for Naval Analysis (CNA),

“Workshop on Economic Development in Stability Operations,”

Washington, DC: U.S. Army Peacekeeping and Stability Operations Institute and Center for Naval Analysis (CNA), April 6, 2009.

97. Cynthia Donovan, Assistant Professor of International Development, Agriculture, Food, and Resource Economics, Michigan State University, interview with the author, June 15, 2009.

98. Joseph Hanlon, interview with the author, March 5, 2009.

99. U.S. Embassy Maputo, Economic Section, working documents related to IMF Structural Adjustment Facility, June 1988.

100. Hanlon, interview with author.

101. Smith.

102. “Background Note: Mozambique,” U.S. Department of State, Bureau of African Affairs, September 2008, p. 6; and Smith.

103. Hanlon, interview with author.

104. M. Anne Pitcher, Transforming Mozambique: The Politics of Privatization, 1975-2000, Cambridge, UK: Cambridge University Press, 2002, p. xv.

105. Ibid., pp. 19, 53-56.

106. Manning, p. 215.

107. Joseph Hanlon, “Bringing It All Together: A Case Study of Mozambique,” in Junne and Verkoren, Postconflict Development, Westport, CN: Lynne Rienner, 2005, p. 480.

108. Ibid., p. 481.

109. Background Note: Mozambique.

110. Several senior U.S. military officers in lectures to the U.S.

Army War College class of 2009.

111. Central Intelligence Agency, World Factbook, Afghanistan.

112. Lief Rosenberger, Economic Advisor, U.S. Central Command, Roundtable discussion at Peace Keeping and Stability Operations Institute, June 15, 2009.

113. Ibid.

114. Richard Smyth, U.S. Foreign Service Officer with extensive experience in Afghanistan as a political advisor (2005-06), and previously as Principal Officer in Preshawar and Embassy Vice Consul, and U.S. Peace Corps Officer, interview with the author, March 6, 2009.

115. Major General Abdul Faryed (Khaliq), G-2, Army of Afghanistan, presentation to PKSOI, February 2, 2009.

116. Smyth.

117. Michael Metrinko, former Political Counselor, U.S.

Embassy, Kabul, interview with the author, May 18, 2009.

118. Paterson and Blewett, p. 5.

119. Ibid., p. 7.

120. Kanishka Bakhshi, Political Specialist, U.S. Embassy Kabul, interview with the author, May 18, 2009.

121. Ibid.

122. Ibid.

123. USAID/Afghanistan, Economic Growth, June 4, 2009.

124. Paterson and Blewett, p. 13.

125. John Yale, Director, World Vision Angola, interview with the author, August 27, 2006.

126. Gordon Weyand, USAID, Afghanistan-Iraq Desk, interview with the author, March 2, 2009.

127. “Failed State Index,” June 3 , 2009, available from www.

foreignpolicy.com.

128. CIA World Factbook.

129. Michael Dziedzic (U.S. Institute of Peace), Barbara Sotirin (U.S. Army Corps of Engineers), and John Agoglia (U.S. Army Peace Keeping and Stability Operations Institute),

“Measuring Progress in Conflict Environments (MPICE): A Metric Framework for Assessing Conflict Transformation and Stabilization,” Washington, DC: United States Institute of Peace, 2008.

130. “Framework for Success: Societies Emerging From Conflict,” United States Institute of Peace, based on the “Post Conflict Reconstruction Task Framework” of the Association of the U.S. Army and the Center for Strategic International Studies, as well as the “Planning Framework for Reconstruction, Stabilization and Conflict Transformation,” prepared by the Department of State (S/CRS) and the Joint Warfighting Center of U.S. Joint Forces Command, Draft, August 2006.

131. Craig Cohen, “Measuring Progress in Stabilization and Reconstruction,” Stabilization and Reconstruction Series No. 1, Washington, DC: United States Institute of Peace, March 2006, p.

7.

132. Ibid., p. 11.

In document Visit our website for other free publication downloads (Page 55-73)